Partnership has warned that to meet essential costs while maintaining some discretionary expenditure, retirees need a take home income of £14,631 per year, currently £1,626 above the typical UK pension income of £13,006.
The annuity provider surveyed over 1,500 people between the ages of 40 and 70 earlier this month, finding that essential expenses such as utilities, food, clothing and household maintenance made up 72 per cent of their expenditure, while discretionary expenses such as socialising and holidays made up 28 per cent of outgoings.
Those aged 40 to 50 believed they needed the most in retirement (£17,549), followed by those aged 66 to 70 (£14,112), while those just about to retire (61 to 65) believed they needed the least (£11,568).
The level of pension income received ranges across the regions, between £11,754 in Northern Ireland and £14,062 in London, while the amount of income people believe they need varies far more, from £18,238 in Scotland to £11,864 in Yorkshire.
Taking into account average pension income in each area, the Scottish have the largest deficit between reality and aspiration, down £5,433, followed by those in Wales, down £2,995, and the East Midlands, minus £2,419.
Andrew Megson, managing director of retirement at Partnership, said: “This research clearly shows that in order to heat and eat, people may well need to cut back on the more enjoyable aspects of retirement such as holidays, socialising and luxuries.
“This seems completely contrary to the picture of retirement that we generally aspire to and suggests that not only do people need to save more but they need to carefully budget their retirement income.
Mr Megson argued that an enhanced annuity provides the most cost effective way to take a guaranteed income to cover essential costs.
“Retirement finances can be daunting but ensuring that you have the essential income you need means you can take greater investment risks with any other income you have.”